Natural gas fuels rising electric costs

CONCORD - As the winter heating season approaches, the effect of rising natural gas prices will be felt on electric bills across the state.

The three regulated utilities - Public Service of New Hampshire, Unitil and Liberty - have requests for increases in their energy supply charges either pending before the Public Utilities Commission or already approved by the PUC.

Public Service of New Hampshire announced last week it would most likely seek an energy supply rate of 8.96 cents per kwh as of Jan. 1, up from the current 8.62 cents.

PSNH serves about 70 percent of the state and has lost more than 90,000 residential customers to competitive electricity suppliers since those suppliers began offering lower rates more than a year ago.

The other two regulated utilities, Unitil and Liberty, have been fairly immune to the loss of energy supply customers because their rates, not affected by power plant ownership, have been equal to or lower than rates offered by competitors. But that's about to change.

The Public Utilities Commission recently approved an energy service charge of 8.89 cents per kwh for Liberty Utilities and is considering a request for a .77 cents per kwh charge for Unitil.

Liberty, whose franchise territory includes western and southern areas of the state, serves about 6 percent of the retail customers in New Hampshire, while Unitil serves about 11 percent of the state's retail customers in both the Seacoast and Concord areas.

Between them, they account for about 100,000 residential customers who are likely to become targets of aggressive marketing by competitors who, until now, have focused on the PSNH franchise area, with its 425,000 residential customers.

"We are now actively soliciting customers in the Unitil and Liberty franchise areas," said Taff Tschamler, senior vice president for business development at North American Power, one of the most active competitive energy suppliers in the market. "We just started last month."

Competitors enter fray

North American is offering 7.59 cents per kwh on a 12-month guarantee, while ENH, another large competitive supplier, is offering 7.89 cents per kwh for the same period. There are 14 registered providers of competitive energy supply, all with varying terms and rates. The regulated utility continues to deliver the electricity, read the meters and manage the billing, no matter who supplies the power.

"Rates we are seeing upcoming for this winter certainly reflect the market conditions," Tom Frantz, director of the electric division for the PUC, said in testimony before a legislative oversight committee on Wednesday. He cited the rising price of natural gas, which fuels most power plants in the region, as a major factor.

Tschamler said competitive suppliers are also feeling the cost pressure, but operate with a different business model. For example, competitive suppliers can charge a fee if customers switch suppliers before the end of their contract term, whereas the energy supply customers of a regulated utility can come and go as they please.

"The wholesale prices are extremely high for January," he said. "We've had to sharpen our pencils. Our margins are very tight in the winter, but we feel it's worth doing that because the margins are better in the other parts of the year, and we want to build a competitive business."

Power plant costs

The energy charge from PSNH includes costs associated with its power plants, so customer migration is a concern among regulators.

As more customers leave PSNH, a shrinking customer base has to support those power plant expenses.

But Unitil and Liberty do not operate power plants and are allowed to charge customers only what they pay for their power on the wholesale market. They make their money exclusively on transmission and delivery.

"As far as energy suppliers go, we want our customers to be able to make the choice that's best for them," said Liberty spokesman John Shore. "We don't mark it up. So if they want to make the choice to go to a supplier that they choose, that's perfectly fine with us. We're not thrilled about the rates going up either, but there's not really much we can do about that."

That sentiment was echoed by Alec O'Meara, spokesman for Unitil. "We have in the past said that third-party choice is an option for our customers," he said. "If they can get a better rate, we have encouraged them to do so."

The exception to the trend is the New Hampshire Electric Co-op. Its rates are set by a board of directors and not regulated by the PUC. The co-op is now charging 7.11 cents per kwh and will lower the rate to 6.77 as of Nov. 1 for its 60,000 customers in the central part of the state, according to spokesman Seth Wheeler.

A new service designed to help consumers compare and choose from the myriad electric supply options, ShopEnergyPlans.com, went live on Thursday.